After Years Of Trying To Kill YouTube, Movie Studios Are Embracing & Profiting From It

from the funny-how-that-works dept

When the Betamax/VCR first came out, Hollywood insisted that it was pure evil and that it would be "the Boston Strangler" to the movie business. And, if you looked at how the devices were used at first, you could easily argue that the vast, vast majority of the usage was, in fact, infringing. In part, that was because the movie studios were so freaked out about such devices, they couldn't even comprehend offering licensed movies for home viewing at the time. Instead, the device was purely about "theft." Of course, after a drawn out trial, the Supreme Court (very closely) came down in favor of the VCR, and said that because it had substantial non-infringing uses, it was legal. Just a few years after that, the home video market for the major Hollywood studios was so large, that it was widely claimed that the VCR saved Hollywood, rather than killing it.

This story is not a unique one. We seem to see the same thing with every disruptive technology that old guard entertainment firms can't comprehend. When radio was introduced it was declared that it would kill the music industry. The RIAA worked hard to have the MP3 player declared illegal.

It happens over and over again -- and each and every time, soon afterwards, new markets emerge, new opportunities become abundantly clear, and the platform that was supposedly pure evil and bent on the destruction of the industry turns out to be a huge new revenue base and opportunity, usually providing revenue in ways that simply weren't possible before that new technology came along.

It sure looks like the same exact thing is happening with YouTube. As you probably know, Viacom is still engaged in a drawn out lawsuit against YouTube over many thousands of clips that Viacom insists were infringing and a massive blight on its bottom line.

And yet... because YouTube had the time to develop, something interesting has been happening. By now you're hopefully all familiar with ContentID. While it has its quirks and issues, one thing that is clear is that it's become a tremendous source of revenue for content creators to monetize works uploaded by others. But it's not just others. NPR has a story about how the major MPAA Hollywood studios -- including Viacom -- are now profiting nicely by purposely uploading all sorts of clips from their various movies, knowing that people are searching for and watching key moments... which they can monetize:

Oh, and the fun part: she gets to watch movies, pick the most memorable moments, and upload those clips to YouTube. Today, it's L.A. Story.

"We always pick a clip that has a beginning, middle and an end," says Strickland, pointing out the various fields she has to fill out in the content management system before she uploads a clip to YouTube. "I put everyone that's in the scene: so Steve Martin, Richard Grant, Victoria Tennant, Sarah Jessica Parker, I put some of the memorable dialogue — 'SanDeE your breasts feel weird, oh, that's because they're real' — then you put discussion topics, character types, settings, eras, what they're doing."

It consists of hours of tedious work to ensure this licensed content will show up first when you go searching for your favorite movie clip on YouTube. Not an easy task when 60 hours of video are uploaded to YouTube every minute.

This is a company that all the big MPAA studios are hiring to go out, find these clips in their own movies, and upload them (and then do things to get them to the top of Google searches). Apparently, it's quite lucrative for the studios. Of course, what's funny is that the same people who are now celebrating this new revenue stream are also the ones who just a few years ago insisted not only that YouTube was illegal, but that it was dead, because no money could be made from it. But, somehow, these things have a way of working themselves out if they're allowed to do so.

This is one of the things that is so troubling to me about the abrupt shutdown of Megaupload. While, at an initial glance, it's easy to insist that the service must be illegal, the company was actually very actively trying out unique new business models for artists, which many artists celebrated. But we'll never know how well those would have worked. When the VCR, radio, the MP3 player and YouTube first came on the scene, the industry insisted they were all just as bad as Megaupload. In hindsight those arguments seem pretty silly -- but it seems like we'll never be able to get that same hindsight for Megaupload. And that's a real shame for the content creators who almost certainly would have embraced new business models enabled by this new technology.

Filed Under: contentid, hollywood, vcr
Companies: megaupload, mpaa, viacom, youtube

Re-Inventing Public Libraries For The Digital Age

from the no-extra-money-required dept

It would be something of an understatement to say that the world of public libraries is undergoing rapid change at the moment. On the one hand, the rise of open access means that people are increasingly able to find information online that was formerly held in serried ranks of volumes stored on library stacks. On the other, publishers' reluctance to allow ebooks to be lent out puts a key traditional function of libraries under threat. So what exactly should public libraries being doing in the digital age? Eric F. Van de Velde has written a a fascinating exploration of that question, along with a few suggestions.

Here's the central problem:

The value propositions of paper-based and digital lending are fundamentally different. A paper-based library builds permanent infrastructure: collections, buildings, and catalogs are assets that continue to pay dividends far into the future. In contrast, resources spent on digital lending are pure overhead. This includes staff time spent on negotiating licenses, development and maintenance of authentication systems, OpenURL, proxy, and web servers, and the software development to give a unified interface to disparate systems of content distributors.

This means:

Libraries need a different vision for their digital future, one that focuses on building digital infrastructure. We must preserve traditional library values, not traditional library institutions, processes, and services.

So how might that work in practice?

By gradually converting acquisition budgets into grant budgets, libraries could become open-access patrons. They could organize grant competitions for the production of open-access works. By sponsoring works and creators that further the goals of its community, each library contributes to a permanent open-access digital library for everyone. Publishers would have a role in the development of grant proposals that cover all stages of the production and marketing of the work. In addition to producing the open-access works, publishers could develop commercial added-value services. Finally, innovative markets like the one developed by Gluejar allow libraries (and others) to acquire the digital rights of commercial works and set them free.

That's an exciting vision, because it turns libraries into active participants in the creation and propagation of knowledge that is universally available through open access, instead of simply lending out the productions of others, without any real ability to apply the huge store of knowledge librarians have acquired about what their users want. It's particularly encouraging that this is not just a plea for more funds -- unlikely to be heeded in the current economic climate -- but a simple if revolutionary call for a better use of those that are already available.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Filed Under: digital, library, publishing

When You Create Value It Doesn't Mean You Have To Capture Every Bit Of That Value

from the share-the-value dept

As I discussed in my Hacking Society post, one of the things I'm thinking a lot about these days is how to measure value that isn't directly monetized. There's a related aspect to all of this, as well: recognizing that when you create value, you don't have to monetize all of it directly yourself. Historically, in economics, they've talked about things like "externalities" and "spillovers" when discussing parts of the economic value chain that can't be controlled or monetized directly. However, it seems like a growing number of economists are realizing that this undersells what's happening. Externalities and spillovers often feel like a small thing -- a tangential bit tossed off to the side. But when you're dealing with information and digital goods, it's important to recognize that these things can be a major part of the market, and may not be controllable at all. And that may be a good thing.

In the discussion we had about Craigslist, one of the points was that while Craigslist itself only "captures" a small part of the value it's unleashed, that's not necessarily bad. First, it's good because much of that value to go out to the users of Craigslist themselves. That's why they appreciate and use Craigslist in the first place. If Craigslist tried to capture all of that value itself, people would stop using Craigslist. Now some may argue it becomes a different situation when you have third parties monetizing some of that value, but I disagree. When you look at the most successful companies in the world, they're often platforms -- they create value and capture some of it, but also allow much of that value to be monetized by others.

Look at Microsoft, Apple, Google and Facebook. All of them created a massive amount of value -- and all have become phenomenally successful companies -- but all of them did so by also letting others monetize large portions of the value they created. It's how you build a more long-lasting ecosystem from which you can continue to profit from over time. If you seek to capture all of the value yourself, you don't last very long.

I got to thinking about this more, after hearing the CEO of The Economist (who, one would hope, would understand these economic concepts) complaining about Flipboard capturing some of the value The Economist creates, and declaring it a "competitor" to The Economist's own digital and app ambitions.

“But you’re heading down a route we’ve seen before – giving the opportunity to extract value to somebody else in an area that should be our own – so Flipboard is problematic.”

Of course, that ignores the fact that Flipboard -- an aggregator app -- provides its own value as well. People don't use Flipboard just because it includes content from The Economist. They use it because of the overall experience and the fact that it aggregates content from lots of different sources in one place. As much as The Economist, or any publication, might like to "own" the reader, that's not necessarily what the reader wants. Letting others "extract" some of that "value" can actually be a really good thing. Flipboard provides a useful service for The Economist in not only experimenting with new ways to aggregate and present content -- from which The Economist can learn -- but also in potentially expanding The Economist's audience as well, feeding much greater value back into that ecosystem.

Yes, companies need to look at the overall market and see where it is they can extract value -- but you have to wonder about those who claim eminent domain over certain parts of the marketplace. Letting others extract some (and perhaps lots) of that value can have tremendous benefits for those who do so.

Filed Under: economics, externalities, jacking society, spillover
Companies: amazon, apple, craigslist, facebook, flipboard, google

Hacking Society: It's Time To Measure The Unmeasurable

from the value-and-benefit dept

I was lucky enough to attend a small gathering of great thinkers put together by Union Square Ventures earlier this week for an event they called Hacking Society -- which was designed to be a one day open conversation on the economics and power of networks, and how to use that as a force for good, in solving economic and social challenges. There were lots of great thoughts that came out of the event (which was live streamed over the web for people to listen in and participate via Twitter -- as many did). It would be impossible to sum up all of the great points in a single blog post, so I'm just going to discuss briefly the larger themes that hit me and helped to connect a few disparate ideas in my own mind.

The first issue was the role of incumbents (of all kinds) in trying to block innovation. As Clay Shirky amusingly repeated the so-called "Shirky Principle" (not named by him, but for him) on command a few times, "institutions will try to preserve the problem to which they are the solution." Economics professor Luigi Zingales made a similar point, but from a slightly different perspective, noting that "All entrepreneurs want a free market when they enter and don't want one after they win." That's just another way of showing the nature of incumbents under crony capitalism. Rep. Jim Cooper also made a similar point, noting that "The past, in general, is over-represented in Washington. The future has no lobbyists."

These are all variations on the same basic theme -- which all of us know is a significant problem. Of course, we've seen this many times over -- and it's certainly true on one of the key issues we talk about, intellectual property. If you look through the history of intellectual property expansion, it tends to slow innovation. That is, you get areas where there is great innovation, often with little to no protections, and it's then that incumbents demand protectionism in the form of greater IP laws and enforcement. It's a way to lock in their success, and limit disruptive upstarts. It is, as Zingales was saying, a case where the free market is useful until they've won -- and then they use the laws to try to protect their position.

But how do we deal with this problem?

That's where things (not surprisingly) seemed to get bogged down. Some suggested having to play the game the way it's done today -- setting up a SuperPAC, hiring lobbyists, and having "the future" represented in DC. That idea didn't go over too well with the rest of the room, who felt that the power of networks might enable something different and something new. I'd argue that it's even more than that. Because of the power of the incumbency, there's simply no way that anyone could effectively represent "the future" long term from a traditional lobbyist role. You'd always have some who could do it some of the time, but it wouldn't be sustainable -- either due to a lack of true funding to the level of the incumbents, or (worse) having the "representatives of the future" get "captured" by the incumbency.

However, as the discussion danced around this question, something interesting happened. Fred Wilson, from Union Square Ventures, suggested that Craigslist went against the traditional "capitalist" model of maximizing revenue. And while Craig Newmark (in his usual fashion) wouldn't make a direct statement on this, I challenged the assumption -- as I did in writing many years ago -- noting that this claim ignores the function of time. Those who think capitalism is about maximizing all revenue at this second are missing out on what it means to maximize revenue over time. That is, if Craigslist raised rates on everything to maximize revenue in the short term, it would almost certainly lead to an untimely death in the long term. That's because it would open up all sorts of opportunities for others to come in and undercut them and take away their business. That gives them the ability to keep customers happy and keep making revenue (and lots of it) in the much longer term. To me, that is true capitalism.

Wall Street thinking is maximizing revenue today -- without consideration for how that impacts revenues over time. That's not strategic and it's not smart. Smart capitalism is recognizing the importance of the time function. It means actually aligning your own best interests with the public's -- because if you don't it just opens up an opportunity for others to better serve the public. So when people suggest (as they did) that companies like Craigslist and Kickstarter are not "maximizing revenue," I disagree completely. They absolutely are, because they're providing so much consumer value, that they're able to continue to make a ton of money themselves, because the public wants to come back and wants to support them. Not because they have no other choice.

In effect, what companies like Kickstarter and Craigslist have shown is the way in which a more strategic player avoids the trap of the incumbent. By thinking that they're not trying to maximize revenue, they actually do end up maximizing revenue, because they take more of a public-first mentality, which drives more business and more opportunity... in part because so much of the value flows back to the public.

And therein lies the challenge of measurability. There is all sorts of economic activity that isn't properly measured today. When people look at Craigslist and say it's not maximizing revenue, that ignores the massive value that it has created, in part by leaving money in the pockets of others (who used to have to pay for similar services) while at the same time providing a tremendously useful service. But, because it's not a direct transaction, it doesn't get "counted" in the traditional sense. Tim O'Reilly really drove this point home in the discussion, talking about how we need to better measure that "hidden economy." That is, we need to measure the true value of something over time, rather than the limited value of just the direct cash transactions.

To some extent, this is a fault of economic linguistics. We measure economic value in monetary value -- even when it doesn't involve money directly. And, yet, because of this, we often forget that non-monetary transactions have tremendous costs, price and value as well. Thus they get ignored. Economics is supposed to be (in part) about that intersection of cost and benefit -- but a very, very large percentage of the economy is not about monetary costs and benefits, even if that's how it's often measured.

The end result, then, is that we're not properly recognizing the benefits (or, indeed, the costs), because we're ignoring the vast majority of those in assuming that anything that doesn't involve monetary exchange has no benefit or cost.

If one thing comes out of this discussion is that I think it's time we start looking for ways to change this. I'd like to start. We've already been doing some research that hopefully highlights costs and benefits in ways that weren't clearly stated previously, but that was very narrowly focused. I'm hoping that as we move forward, we might be able to start to construct new models and new research that really explores the true value of all the benefits and costs of such things. If that, alone, can help companies recognize that the path of incumbency is actually not the best one for long term maximization of benefit, then perhaps we can get more companies to act like Craigslist or Kickstarter -- where even they don't think that they're maximizing revenue, because they choose not to seize the largest possible percentage of the pie today, knowing that by allowing much greater consumer surplus, they're actually expanding their own opportunity for tomorrow.

There was a lot more discussed during the day (and into the evening over drinks and dinner), but this is the line of thinking that has me most interested, and it's an area that I hope to continue to explore -- with your help.

Filed Under: clay shirky, craig newmark, fred wilson, hacking society, wall street
Companies: craigslist, kickstarter

'Almost Anybody Can Have An Idea' -- Linus Torvalds

from the obvious,-really dept

A constant theme here on Techdirt is that it's not the idea that's crucial, but the execution. Here's someone who seems to agree:

People like to idolize the "ideas" and "inspiration", but in the end, almost anybody can have an idea. Getting things actually done is where people stumble.

The person speaking those words -- Linus Torvalds -- certainly hasn't stumbled much. In January 1992, only about 100 people in the world were using his Linux kernel, which he had written as a 21-year-old student in his Helsinki bedroom, on a PC with 4MB of RAM. Twenty years later, Linux sits at the heart of some 300 million Android devices, with 850,000 more being added every day, and runs 91% of the world's top 500 supercomputing systems.

The idea of writing a kernel for Richard Stallman's GNU operating system was obvious to everyone -- it was the key piece still missing. In fact, a year before Torvalds started Linux, Stallman himself had begun working on a version called the Hurd, along with a few fellow coders of his Free Software Foundation.

Despite this impeccable pedigree, the Hurd is being used today by only a tiny fraction of the hundreds of millions running Linux -- further evidence that it's really not the idea, but the execution that counts.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Filed Under: execution, fsf, gnu, idea, inspiration, linus torvalds, linux